Case Law Details
The facts of the case are that the Assessee, (who died during the pendency of this appeal and is substituted by her legal representatives) was a housewife, having no source of income other than the pension of her deceased husband. The Assessee was the owner of property No. F-23, Hauz Khas, New Delhi wherein she was residing since 1956.
The Assessee entered into an agreement with M/s Exclusive Properties (hereinafter ‘the Builder’) on 27th May, 1991 to construct flats on 985 sq. yards of land on her property. In terms of the said agreement the Builder was to develop and construct at its own costs and resources and in lieu thereof the Builder was to be allotted proprietary rights of 40% in the built up area and 60% was to be retained by the Assessee.
In the return filed for Assessment year 1992-93 the Assessee claimed that she did not have any residential house. She offered to tax capital gains arising from the transfer of the 40% rights to the builder in terms of Section 54 F read with Section 45 of the Act. This was on the basis that in lieu of the consideration in terms of money, the Builder had constructed the new residential house.
On 17th December, 1992 the Assessee entered into an agreement for sale of two of the flats from her share in the property to close family friends. In the return filed for the AY 1993-94 she declared Rs. 11,55,802/- as long term capital gain in terms of Section 54 F (3) of the Act. It is not in dispute that she paid the long term capital gains tax computed on the above basis.
The return was picked up for scrutiny and on 18th March, 1996 the Assessing Officer (AO) passed an assessment order in which, after setting out the clauses of the agreement entered into with the Builder, the AO concluded that the agreement was “in the nature of adventure for trade on the property”. The AO proceeded to treat the sum received by the Assessee pursuant to the agreement for sale dated 27th May, 1992 not as long term capital gain but as a business income.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
